IN THE IOWA DISTRICT COURT FOR POLK COUNTY

PRUDENTIAL INSURANCE COMPANY OF AMERICA.

Petitioner,

VS.

IOWA CIVIL RIGHTS COMMISSION,

Respondent.

and DORIS CARRUTHERS,

Intervenor.

AA1 529

RULING

STATEMENT

This is an action for judicial review of a contested case decision and involves an appeal from the final decision of the Iowa Civil Rights Commission (hereinafter Commission). The decision of the Commission was filed on May 24, 1989, finding that Prudential is a public accommodation within the Iowa Civil Rights Act and ordered Prudential to do certain things. From said decision, Prudential has filed this administrative appeal.

A motion was filed by the Iowa Life Insurance association to appear as "amicus curiae". The Court sustained the motion, and said Association filed a brief and apppeared at the appeal hearing.

At the hearing, the petitioner was represented by its attorneys, Patrick M. Roby and Natalie Gaull; the Association by its attorneys, James R. Swanger and Kristian Anderson; the Respondent Commission by its attorney, Rick Autry; and the Intervenor Carruthers by her attorney, James F. Elliot.

The Court, after reviewing the entire record made before the respondent, hearing the statements and arguments of the attorneys, reviewing the briefs filed, and being fully advised, States:

1. The Court has jurisdiction over the subject matter of this action and over the parties hereto.

2 This is an applicaiton for judicial review of an adverse decision in a contested case after all administrative remedies have been exhausted.

ISSUES

1. Whether Prudential is a public accommodation as defined in Iowa Code Section 601A.2(10).

2. Whether Prudential's policy of rejecting life insurance applications of all people whose main source of income is public assistance has the effect of unlawfully discriminating against women.

3. Whether the Commission had jurisdiction to hear this case.

4. Whether the Commission erred in awarding Carruthers a paid-up policy, although she made no attempt to mitigate her damages.

STATEMENT OF THE CASE

In 1984 Doris Carruthers decided she wanted to buy some life insurance. Carruthers was 35 years old at the time, divorced, with two children. She was studying to be a licensed practical nurse and had no source of income except for government assistance. At the time she was receiving ADC, food stanps, and Title 19 medical care plus mileage money to attend school. She had seen advertisements for Prudential; her friends knew a Prudential agent, Dan Jackson. Eventually, she talked with Jackson and filled out an application for insurance.

Prudential had a policy of not selling insurance to people whose main source of income was derived from public assistance. Jackson knew of this policy and informed Carruthers of it at the time she filled out her application. Carruthers submitted the application anyway, even though Jackson told her she would probably be denied. Prudential did deny Carruthers' application. Jackson was a sales agent for Prudential working out of Prudential's Ottumwa office. That office employed sixteen agents, two sales managers, and two clerks. Prudential advertised its services through the yellow pages locally and through radio and newspapers both locally and nationally.

DISCUSSION

Judicial review of agency action is authorized under Iowa Code Section 17A. 19(8). Said section provides the standards which are to guide the courts on review. The courts may directly rule on questions of law, but fact questions are reviewed through the substantial evidence test. Substantial evidence is defined as when a reasonable mind would accept the evidence as adequate to reach a conclusion. Ellis v. Iowa Department of Job Service, 285 N.W.2d 153 (Iowa 1979).

The first issue is whether Prudential is a public accommodation as defined by Chapter 601A. To be subject to the unfair practices prohibited by Section 601A.7, the actor must be classified as a public accommodation. Public accommodation is defined in defined in Section 601A.2(10) as:

[E]ach and every place, establishment, or facility of whatever kind, nature, or class that caters or offers services, facilities, or goods for a fee or charge to nonmembers of any organization or association utilizing the place, establishment, or facility ...

The interpretation to be given this section was closely analyzed in United States Jaycees v. Iowa Civil Rights Commission, 427 N.W.2d 450 (Iowa) 1988. The issue in Jaycees was whether the Jaycees, as a membership organization, was a public accommodation. Id. at 453. More particularly, the Court considered the "place, nature, or facility" language of subsection 10. The Court found that those terms connotes a spatial dimension to public accommodation. Id at 454. The Court went on to find that since there is no spatial dimension in just being a member of the Jaycees, the membership organization is not a public accommodation. Id.

The Jaycees Court recognized the doctrine of noscitur a sociis, which provides that the meanings of statutory terms are ascertained in light of the meaning of words with which they are associated. Id. at 454. Place is defined as a "physical environment", and establishment and facility both have common definitions which have spatial connotations. Id. The Court also stated that even a broad reading of the public acommodation definition has a spatial context. Id. It cites a law review article by Professor Bonfield which advocates a broader definition of public accommodation, which at the time was defined narrowly by statute, but still seems to maintain a spatial dimension. Id. The definition proposed by Professor Bonfield is substantially close to the present definition.

In Jaycees, the membership organization was not a public accommodation because there was no spatial dimension to membership in the Jaycees. A contrary example would be a restaurant, which is certainly within the meaning of public accommodation. A restaurant is a place, and there is a spatial aspect to it. A customer who enters the restaurant is entitled by the statute to the services and goods that are ordinarily offered to customers of the restaurant. Services are not usually thought to be spatial in nature, but services are expressly protected under the definition, as long as they are offered by a place, establishment, or facility. If the restaurant is a sit-down restaurant, where a waiter or waitress provides services to the customer, those services will be considered as part of the public accommodation.

In the present case, it is difficult to distinguish an insurance company from the restaurant. Jackson, the insurance agent, worked at a Prudential office in Ottumwa. This office must be considered s a place under the definition. Like a restaurant, it has a spatial quality. People work there to provide customers with goods and services relating to insurance. The office is open to customers who expect the services that are ordinarily offered by the insurance company. There is no reason to treat this office any differently than a restaurant; therefore, it should be covered under the statute.

Proceeding with the analysis, there is no distinction between someone who does not actually go to the building to conduct business and someone who does. Many business transactions can be conducted over the phone or through the mail. But even then the place of business is still being utilized, as there has to be a place where the customer can write or call. By making available a phone number or address through which a customer may contact the business, the business is establishing a place which offers goods or services to potential customers. In each case, there must be some spatial dimension to the business in order to receive the mail or call. Therefore, businesses which welcome contact by customers through the mail or by phone must be considered as a place.

In the present case, agent Jackson had an office in Ottumwa. The office was open to the public and also did business by phone and mail. Prudential advertised the address and phone number of its office in the yellow pages of the phone book. Although Carruthers did not go to the building, and it is unclear whether she wrote or called, Prudential cannot escape its duties just because this transaction was done at a home. Because Prudential had an office which customers could utilize to receive goods and services offered by Prudential, it must be considered a place under Section 601 A.2(10). Therefore, Prudential is a public accommodation for purposes of Chapter 601 A. The agency decision should be affirmed on this ground.

The second issue is whether Prudential's policy of rejecting all applications for life insurance from people whose main source of income is from public assistance is prohibited by section 601A.7. In order to show a violation, the claimant must prove that she is a member of a protected class. Section 601A.7. The agency determined that Carruthers showed that Prudential discriminates on the basis of sex through the disparate impact of its policy. Prudential claims that the disparate impact theory is not available in Iowa and, even if it is, it has not been proven in this case.

Iowa has recognized the theory of disparate impact in employment discrimination cases under chapter 601 A. Iowa Civil Rights Commission v. Woodbury County Community Action Agency, 304 N.W.2d 443, 448 (Iowa App. 1981). Disparate impact is defined as a situation in which the practice is facially neutral in its treatment of different groups, but, in fact, it falls more harshly on one group than another and cannot be justified by business necessity. Id. at 449. In these cases, it is possible to show discrimination from statistics alone. Id.

The present case is one which challenges a broad policy of a company and is a natural for disparate impact analysis. There is no reason to limit the disparate impact theory to the employment discrimintion provisions of Chapter 601 A. Therefore, the disparate impact theory should be applied.

In Woodbury, the Court cited Griggs v. Duke Power Co., 401 U.S. 424 (1971) as providing the standard for disparate impact claims. Id. Griggs states that an employer policy that is discriminatory in operation is prohibited unless the company can show a genuine business need for the policy. 401 U.S. at 431-32. The Court found that the employer's "alternate [job] requirements" operated to discriminate against blacks. The alternate requirements included having a high school diploma (34 percent of white males in the population had a diploma while only 12 percent of black males had one) and a standardized test (58 percent of the whites passed while only 6 percent of the blacks did). Id. at 430 n.6. The Griggs test was refined in Green v. Missouri Pacific Railroad Company, 523 F.2d 0, 1293 (8th Cir. 1975) to protect one class which is excluded by the practice in question at a substantially higher rate than another class. Presumably, the rates of exclusion cited in Griggs are "substantially higher".

The policy in question in this case is Prudential's policy of refusing life insurance coverage to people whose main source of income is public assistance. The Commission cited evidence which showed that Carruthers was receiving ADC and that the number of women who applied for ADC was in much higher proportion than the number of men. The Commission determined that since a higher proportion of women were on ADC, a higher proportion of women would be turned down for insurance. Thus, it found a disparate impact on women. Continuing this finding is within the standards set by Griggs.

The evidence shows that there were at least ten times more women than men who received ADC. ADC is the primary public assistance program. People who qualify for it qualify for other programs such as Medicaid and food stamps, so it is likely that women are impacted by these programs also. The great disparity of women to men in the ADC program is substantial evidence to support the finding of disparate impact in Prudential's policy. Therefore, the Commissioner's decision should be affirmed on this ground.

The third issue is whether the Commission had jurisdiction to decide this case. Prudential and ILIA contend that the Insurance Commissioner has sole, or at least primary, jurisdiction in matters involving the regulation of insurance. Jurisdiction is authorized to the Insurance Commissioner through Chapter 507B, and more specifically through Section 507b.4(7), which lists unfair discrimination as an unfair or deceptive practice.

The Insurance Commissioner does not have sole jurisdiction over this dispute. There is no language in the Code that grants exclusive power to the Insurance Commissioner to decide all disputes that relate to insurance. In fact, Iowa Code Section 507B.8 provides that an order from the Insurance Commissioner shall not relieve or absolve any person affected by such order from any liability under any other laws of this state. As discussed earlier in this ruling, the question in this case is whether Prudential's practice of not providing insurance to people whose main source of income derives from public assistance violates Chapter 601 A. Since jurisdiction is granted to the Civil Rights Commission to decide claims under Chapter 601 A, and there is no prohibition to stop it from hearing cases relating to insurance, the Civil Rights Commission has jurisdiction to hear the case.

The second question is whether the Insurance Commissioner has primary jurisdiction. The doctrine of primary jurisdiction is usually used when there is concurrent jurisdiction between a court and an administrative agency. See Rowen v. LeMars Mutual Insurance Company of Iowa, 230 N.W.2d 905, 912 (Iowa 1975). The doctrine calls for a court to refrain from making an initial determination on the case in order to let an agency decide it. 4 Davis, Administrative Law Treatise Section 22:1 (2nd Ed. 1983). The most common reason for recognizing primary jurisdiction is that the agency is a specialist on the question in dispute. It is reasonable to recognize the same doctrine between administrative agencies, as the same jurisdictional overlaps occur between agencies, and one may have greater expertise to decide the issues than the other.

Under the primary jurisdiction doctrine, an adjucicatory body will not make a determination of a question that is within the jurisdiction of an administrative agency prior to the solution of that question by the agency 1) where the question demands the exercise of administrative discretion requiring the special knowledge, experience, and services of the agency, 2) to determine technical and intricate matters of fact, and 3) where a uniformity of ruling is essential to comply with the purposes of the regulatory statute administered. Rowen, 230 N.W.2d at 912. Under the above standards, it is clear that the Civil Rights Commission was correct in not refraining from making a determination.

Despite the attempts of Prudential and ILIA to characterize the issue in this case as insurance regulation, the real issue is whether Prudential's practice is unlawful discrimination. Before any regulation of insurance is attempted, the discrimination question must be decided. The Civil Rights Commission unquestionably is the best body to make that determination. This is especially true in a case involving disparate impact, which may pose difficult fact questions. Uniformity also is served, as it is best for the Civil Rights Commission to make determinations on discrimination, rather than leaving it to all the other various agencies. Therefore, based on the standards set forth in Rowen, The Court Finds that the Civil Rights Commission correctly recognized its jurisdiction to decide this case.

The fourth issue is whether the Commission erred in finding that part of Carruthers' damages could have been avoided through mitigation. Prudential contends that Carruthers should not be awarded a paid-up policy as she could have obtained insurance elsewhere. Carruthers testified that she did not try to get insurance from other companies. However, she and the Commission claim that the award was reasonable.

Ordinarily, the plaintiff has a duty to use reasonable and ordinary care and diligence in effecting a cure or treatment for injuries, if any, and she cannot recover for consequences which might have been avoided. Shewrey v. Heuer, 121 N.W.2d 529, 533 (Iowa 1963). The burden to prove that the plaintiff failed to minimize her damages rests with the defendant. Id. In the present case, Prudential proved that Carruthers took no steps to attempt to minimize her damages. Therefore, there is no question that she filed to attempt to mitigate.

However, there was no evidence in the record, to the knowledge of the Court, that Carruthers could have obtained insurance and, if so, how easily she could have found a company that would insure her. If there is no company that would insure her, the damages could not have been minimized and it would have been impossible to mitigate. Because the reasonableness of Carruthers' actions is a fact question, the Court must review it by the substantial evidence standard. Since a reasonable agency could find that Prudential failed to meet its burden of proof on the mitigation issue without a showing of the possibility of minimizing the damages, the substantial evidence test is satisfied. Therefore, the commission's decision is correct and it may properly award a paid-up policy as part of the remedy.

Further, the amount of the fees and costs charged by the Commission to Prudential should be sustained.

RULING

The Court Finds that:

1. Prudential is a public accommodation.

2. There is a disparate impact toward women in Prudential's policy.

3. The Commission does have jurisdiction to decide the case.

4. The Commission did not err by awarding Carruthers a paid-up policy.

5. That the decision is affirmed on all grounds.

IT IS THEREFORE THE ORDER TO THE COURT that the decision of the respondent agency is affirmed on all grounds.

Costs of this appeal are charged to the petitioner.

Dated this 8th day of March, 1990.

JUDGE OF THE FIFTH JUDICIAL
DISTRICT OF IOWA

Copies to:

Patrick M. Roby/ Natalie Gaull

James R. Swanger/Kristian Anderson

Rick Autry

James F. Elliot